TOMAKOMAI, Japan, April 19 (Reuters) - A test site in Japan for burying carbon dioxide (CO2) below the seabed off Hokkaido island is showing more promise than other carbon, capture and storage (CCS) projects by cutting costs and increasing efficiency, its developer says.

While the $300 million site at Tomakomai port represents a small portion of the $20 billion invested in CCS, it has potential for easing CO2 emissions from industries such as gas processing and cement and chemical production.

Most investments into CCS have focused on capturing carbon from power plants fired by coal and other fossil fuels - the largest source of CO2 emissions - but there have been big setbacks and some projects cancelled.

“Tomakomai is an exciting development. Progress on CCS has been far too slow and projects like that are very encouraging,” said Graham Winkelman, climate change lead at BHP.

Industrial applications such as that being tested at the Tomakomai site are where the focus now is on CCS, he said.

BHP is the world’s largest exporter of coal for steel-making, a fuel and industry often marked as big sources of climate-warming emissions.

On an exclusive tour of the Tomakomai test site, developers told Reuters they have cut energy costs by as much as two-thirds compared with other projects and increased the efficiency of capturing CO2.

Those claims have yet to be tested commercially but the project operated by Japan CCS - owned by Japan Petroleum Exploration, Mitsubishi Corp, JXTG Holdings and more than 30 other companies - looks promising.

In contrast, Southern Co’s Kemper power station in the United States was to use CCS in an attempt to get clean power from coal, but was abandoned after billions of dollars of investment.

Chevron Corp has also delayed the world’s largest CO2 injection operation in Australia, after spending A$2.5 billion ($2 billion) on the project at its Gorgon liquefied natural gas plant, itself beset by many problems.

CCS involves separating CO2 from other materials and gases and injecting it underground to prevent it from escaping into the atmosphere or to use it to create pressure to push oil to the surface as wells deplete.

At Tomakomai, by-product gas is piped from a nearby Idemitsu Kosan refinery and CO2 pulled out as it passes through an amine solution. By using the remaining gases to generate power and recycling heat, energy costs are cut to between 1/2 and 1/3 of a typical extraction plant, the company said.

When Reuters visited the site, a counter showed 150,000 tonnes of CO2 had been injected, halfway to the project’s targeted 300,000 tonnes. The injection project is scheduled to run until 2020, with no decision yet on commercial operations.

Asked about costs, officials declined to state figures. Japan CCS has run simulations scaling the site to handle 1 million tonnes a year and these show it can make commercial sense, said Chiyoko Suzuki, manager of international relations at Japan CCS, during the visit.

Australia’s CarbonNet, looking at a similar type of CCS project, last year estimated the cost of compressing, transporting and burying carbon dioxide from gas processing, fertiliser manufacturing and hydrogen production at A$30 ($23.41) a tonne.

Suzuki said he did not know CarbonNet’s details so could not make a judgement.

CCS will be needed to cut 14 percent of the emissions that have to be abated by 2060 to limit a global rise in average temperatures to less than 2 Celsius (3.6 Fahrenheit), the International Energy Agency says.